A co-signer will sign the credit application for your loan, basically saying that they are willing to back you in the purchase of this car. They are agreeing that if, for some reason, you don't make the payments, they will be responsible for re-payment of the loan on the vehicle.



You need to understand that this is a big deal for your co-signer because they are putting their credit score on the line for you. It's important for you to realize that if you don't make your payments, you're not just jeopardizing your credit, but theirs as well. Plus, if you don't make the payments, the car will be repossessed and future liens could be put on their income.

If you are in the position where you need to ask someone to co-sign for you, be very conscientious about what you are asking them to do. Some people just aren't willing to take the risk, so don't be offended if they say no.

Since their name will also be on the loan, it will appear on their credit report too as an additional item. This could also affect their borrowing ability in the future since most lending companies look closely at debt-to-income ratio before they give out money. Carrying too much debt including your car loan could cause them to be turned down when applying for credit.

When you apply with a co-signer, your name and their name will be on the loan. This means the loan is really in the names of two parties at once, but it does benefit you by establishing credit in your name, as it is also in your name too.

Having a co-signer is a risky and delicate matter for many people as it is a gamble for them to trust you completely to fulfill the loan commitment. However, if you are serious about establishing your credit or rebuilding your credit, there's no reason why it has to be such a risk.

One caveat about co-sign loans is there are some real unscrupulous car dealers out there, who lie to you and say you are getting a co-signed loan, but then they trick the cosigner into signing the wrong line of the loan papers and the loan ends up in their name alone.

They pull this scam because they know you would never get approved, and they just want to sell the car, and it happens constantly. The law requires both people to be present and sign at the same time, and you need to make sure the correct names go on the correct lines of the application, identifying you as the borrower, and the co-signer as the co-signer.